UK Foreign Secretary Jack Straw has said Britain is ready to pay an extra 1bn euros (£680m) per year into the European Union budget.

The offer is part of a package aimed at ending deadlock over the 2007-13 EU budget before the end of the year.

Mr Straw said Britain wanted to pay its fair share of the costs of enlargement.

But the President of the European Commission, Jose Manuel Barroso, said the UK deal was "unacceptable" and left the EU with insufficient funds.

The proposed deal cuts development aid to the 10 new member states but makes it easier for them to get the money.

KEY POINTS OF UK PROPOSAL

The UK pays 8bn euros more over seven years

Total budget of 847bn euros over the period

Spending goes below 1% of EU gross national income by 2013

Cut in development aid to new member states

Cuts in rural development payments to older members

Cut in funding for EU bureaucracy

Major review of all spending, including CAP, in 2008

The overall size of the budget would also be reduced to 847bn euros from the 871bn euros proposed by the Luxembourg EU presidency earlier this year.

Mr Barroso said the UK proposal was more suited to a "mini-Europe, not the strong Europe that we need".

"As it is, the UK presidency proposal is unacceptable. It is simply not realistic," he said.

He added that it needed to become "fairer" to the new member states.

'Enormous amount'

France urged the British presidency to "accept a substantial and lasting reform of the British rebate" in the common interest of the European Union.

"The refusal to exclude the essential spending for enlargement from the calculation of the British rebate is unacceptable, as much from a financial viewpoint as from the viewpoint of solidarity and equity," Foreign Minister Philippe Douste-Blazy and European Affairs Minister Catherine Colonna said in a written statement.

They added the proposals did not appear to be "of a nature to lead to the agreement for which we all wish".

German Chancellor Angela Merkel declined to comment, saying she had not had time to the study the details.

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"The proposal is not based on solidarity. In this form it is unacceptable," he said.

On Friday, after meeting Mr Blair in Budapest, he had sounded more positive than other Central European leaders at the same meeting, saying that some progress was being made towards a deal.

The UK says that the cut in aid to the new member states is only a "theoretical" one, as in the past no country has managed to use these funds to the full.

In exchange, Britain also proposes that rules for spending the money should be eased.

Mr Straw said the proposal still envisaged an "enormous amount" of money for development aid in the new member states, equivalent to double the Marshall Fund spent on the reconstruction of Europe after World War II.

Rebate stays

Reports last week suggested the UK was prepared to give up between 12% and 15% of the rebate won from the EU by former leader Margaret Thatcher in 1984.

The Commission has tried to wing this bird before it can get off the ground